Annual Financial Report

FIDELITY JAPANESE VALUES PLC ANNUAL FINANCIAL REPORT, PROXY FORM ANDADDITIONAL DISCLOSURES TO THE PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2009 Further to the voluntary disclosure of the Company's annual results for the year ended 31 December 2009 by way of a preliminary announcement dated 15 March 2010, in accordance with the Disclosure and Transparency Rules ("the Rules") 4.1.3 and 6.3.5(2) this announcement contains the text of the preliminary announcement dated 15 March 2010 together with the additional text in compliance with the Rules. The Company's annual report and financial statements for the year ended 31 December 2009 together with the accompanying proxy form have been filed with the UK Listing Authority Document Disclosure team and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at: Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS Tel: 020 7676 1000 (Documents will usually be available for inspection within six normal business hours of this notice being given). The annual report and financial statements will shortly be available on the Company's website at www.fidelity.co.uk/its Rebecca Burtonwood, FIL Investments International, Company Secretary - 01737 836 869 31 March 2010 FIDELITY JAPANESE VALUES PLC Preliminary Announcement of Results For the year ended 31 December 2009 Chairman's Statement For the year ended 31 December 2009 The Year's Results: NAV (undiluted) 55.56p (+1.98p; +3.7%) The ordinary share price: price: 48.50p (+6.75p; +16.2%) The subscription share price: 8.28p Discount: 12.7% (22.1% in 2008) PERFORMANCE REVIEW Over the year to 31 December 2009, the undiluted net asset value of your Company's shares rose by 1.98p per share (3.7%). The increase in value was primarily due to a rebound in the Japanese stockmarket and the Manager's stock selection. The attribution analysis in the annual report shows that the rise in the stockmarket accounted for 4.34p of the increase in the net asset value per share and that the stock selection by our Manager added another 3.70p. Gearing accounted for an additional 2.31p. On the other hand, the increase in value was largely offset by currency losses (-7.84p per share) as a result of a weaker yen against sterling at the year end. The yen in practice had been stronger during the year but weakened at the time of the year end valuations resulting in these currency losses. The increase in net asset value of 3.7% during 2009 represented an outperformance of 10.0% relative to our Benchmark, the Russell Nomura Mid/Small Cap Index (when expressed in sterling). Given signs of a more benign global macroeconomic backdrop and greater stability in financial systems, cyclical manufacturers performed better than other segments of the market. In the LCD and semiconductor industries signs of a cyclical bottom supported the share prices of electronic parts and materials producers. At the same time inventory restocking and healthier than expected final demand buoyed investor confidence in automobiles and parts makers. Although the generally strong yen posed downside risks to exporters' earnings, their aggressive cost-cutting efforts have created a leaner, more competitive corporate landscape that will translate into higher operational leverage as revenues improve. Performance was further enhanced by the effect of gearing. The Board made a decision in November 2009 to use derivatives for gearing purposes. We expect the use of Contracts For Difference ("CFDs") will provide the desired level of gearing at a lower cost. MARKET REVIEW Against a backdrop of worldwide monetary easing and aggressive fiscal stimulus, global equity markets maintained a steady upward trajectory and Japanese stocks hit a high in August. Thereafter, however, Japanese stocks started to lose momentum and have since lagged their global peers. A landslide victory in Lower House elections by the Democratic Party of Japan ("DPJ"), which brought an end to more than half a century of dominance by the Liberal Democratic Party (LDP), failed to buoy investor sentiment as the DPJ quickly lost much of its political momentum after taking power in September. The weak performance of financials, which faced heavy selling pressure due to concerns about regulatory and capital adequacy risks, and generally renewed strength in the yen precipitated market declines in the autumn. It was only in late November that the yen started to weaken against the dollar, triggering a sharp rebound in Japanese exporters' share prices. However, this was insufficient to offset previous declines during the year. Over the period, smaller companies held up relatively well, outperforming large caps. At the same time, a number of technology-related companies saw their share prices respond positively to earnings upgrades. The best performing sector within the small cap universe was transport equipment (including auto parts makers), followed by non-ferrous metals and electrical machinery. GEARING Following the repayment of the loans with The Royal Bank of Scotland PLC in August 2009 and November 2009 respectively, the Company has no loans. However, the Company has obtained equivalent exposure to the market through the use of Contracts For Difference ("CFDs"). Total assets employed as at 31 December 2008 amounted to £75.17m and, as at 31 December 2009, the total portfolio exposure was £71.36m comprising assets of £53.10m and exposure through CFDs of £18.26m. This change to the Company's Investment Policy was authorised by shareholders at a General Meeting held on 10 November 2009. At 31 December 2009 the long positions of the CFDs amounted to approximately 31.4% of the net asset value (see the annual report for further details). The Company is using CFDs in the same way that it used the traditional bank loans - to increase the exposure to stocks. Due to the accounting treatment of CFDs, the exposure to shares held through CFDs is not treated on the Company's Balance Sheet in the same way as its normal equity investments. Only the unrealised gains and losses of the CFDs are shown. Realised and unrealised gains and losses are reported via the capital column of the Income Statement, with income and expenses relating to CFDs being reported via the income column. Proceeds of CFDs are shown as a separate cash flow item. Additional disclosures to the financial statements have been included explaining the Company's geared position through the use of CFDs, including details on how they are measured and how they are reported. Additional information is also given detailing the underlying exposure to the CFD holdings, and the full portfolio listing in the annual report includes underlying exposure reporting. Further details on the use CFDs may be found in the Directors' Report. SUBSCRIPTION SHARES At the General Meeting in November, a Bonus Issue of one subscription share for every five ordinary shares held by qualifying shareholders was authorised, together with the adoption of new Articles of Association for the Company. Each subscription share gives the holder the right, but not the obligation, to subscribe for one ordinary share at the end of each month from the end of February 2010 until the end of February 2013 inclusive. Each subscription share may only be exercised once. The exercise price is 55 pence per share based on the Company's NAV at 5.00pm on 10 November 2009, plus a 1% premium to such NAV, rounded up to the nearest whole penny. A total of 19,115,381 subscription shares were allotted on 11 November 2009. The subscription shares were listed and dealings commenced on these shares on 12 November 2009. The rights attaching to a total of 59,156 subscription shares were exercised at the end of February 2010, resulting in an allotment of 59,156 ordinary shares of 25p each. Further details on the subscription shares may be found in the Directors' Report. THE BOARD Your Board continues to monitor corporate governance issues, reviewing and updating processes as appropriate. In accordance with the Listing Rules, Simon Fraser, following an evaluation of his performance by his fellow Directors and on their recommendation, will seek re-election at the forthcoming Annual General Meeting. Simon Fraser retired from his executive responsibilities at Fidelity in 2008, however he has agreed to continue his directorship of the Company. Simon Fraser retires and seeks re-election on an annual basis due to his recent employment relationship with the Manager and his directorship of another investment trust managed by Fidelity, namely Fidelity European Values PLC. Having been on the Board for more than nine years and because he has not retired at the last two AGMs, Nicholas Barber is subject to retirement by rotation and seeks re-election at the forthcoming Annual General Meeting. He has proved to be a most diligent member of the Board and has discharged his duties as Senior Independent Director conscientiously. Having been on the Board for more than nine years I will also retire and, following an evaluation of my performance by my fellow Directors and on their recommendation, I will seek re-election at the forthcoming Annual General Meeting. SHARE REPURCHASES Purchases of ordinary and subscription shares for cancellation are made at the discretion of your Board and within guidelines set from time to time by the Board in the light of prevailing market conditions. Share repurchases will only be made when they will result in an enhancement to the net asset value of ordinary shares for the remaining shareholders. In recent years share repurchases have been used sparingly due to their impact on liquidity and gearing. Your Board continues to believe that the ability to repurchase shares is a valuable tool and therefore a resolution to renew your Company's authority to repurchase shares will be proposed at the forthcoming Annual General Meeting. ANNUAL GENERAL MEETING - 13 MAY 2010 The Annual General Meeting will be held at midday on 13 May 2010 at Fidelity's offices at 25 Cannon Street in the City of London and all investors are encouraged to attend. It is the one occasion in the year when shareholders can meet all of the Directors as well as representatives from the Manager. Following the meeting the Portfolio Manager will give a presentation on the past year and the prospects for the current year. CONTINUATION VOTE The Articles of Association of the Company require a continuation vote every three years. An ordinary resolution that the Company continue as an investment trust for a further three years was passed at the 2007 Annual General Meeting. A further continuation vote will take place at this year's Annual General Meeting. During the past year your company significantly outperformed the Russell Nomura Mid/Small Cap Index (in sterling terms) and there are encouraging signs for Japanese companies, particularly those focussed on high growth service sectors and those with exposure to China and elsewhere in Asia. Therefore your Board recommends that shareholders vote in favour of the continuation vote. A further continuation vote will take place at the Annual General Meeting in 2013. OUTLOOK In the near term, sovereign credit concerns in Europe and other macro uncertainties such as a tightening of monetary policy in China could potentially fuel yen appreciation and diminish investors' confidence in Japanese companies' earnings recovery. However, your Board believes that there is the potential for Japanese stocks to catch up with their global peers in 2010. Japan's production recovery is gathering pace due to the completion of inventory adjustments for electronic components and devices, supported by firm demand in overseas markets, particularly in Asia and other emerging markets. This resulted in stronger than expected GDP growth of +4.6% annualised in the fourth quarter of 2009. While this pace of growth is unlikely to be sustainable, the implementation of additional stimulus measures by the government and continued strength in Japanese exports should provide a reasonably favourable backdrop for corporate earnings. In the meantime, many Japanese companies have achieved a significant improvement in profit margins primarily due to far reaching cost cutting efforts. We believe that these companies will continue to display a clear recovery trend into the 2010 Japanese fiscal year as they remain disciplined about cost reductions amid a more benign macro economic environment. There is potential for these profits to lead to a continuation of the trend of improved dividend yields. William Thomson Chairman 15 March 2010 Manager's Review PERFORMANCE REVIEW The undiluted net asset value of the Company rose by 3.7% compared with a 6.3% decline in the Russell Nomura Mid/Small Cap Index (all figures in sterling terms). Alongside most major stockmarkets, the Japanese equity market reached its low point in March 2009 during the financial crisis. Subsequent to that, an unprecedented worldwide fiscal and monetary policy response to the global financial crisis successfully stabilised economies. Credit spreads narrowed, risk aversion receded and equity markets responded with a powerful rally. Although most major equity markets reached new year to date highs in the fourth quarter, the performance of Japanese stocks was poor in comparison. Additional monetary easing by the Bank of Japan and a reversal in yen appreciation precipitated a rebound towards the end of the review period, however it was insufficient to offset previous declines. Despite growing confidence in the global economic recovery, Japan-specific factors such as a stronger yen, political uncertainty and widespread equity financing impeded the market. A rapid increase in the number of equity financing deals had a negative impact on the market. The extent of new share offerings increased dramatically in 2009, totalling an estimated ¥5 trillion for the year. This constituted a relatively high proportion of total market capitalisation and the majority of deals were concentrated in the second half of the year when market conditions were mixed. During the review period, the Democratic Party of Japan and its allies formed a majority in the Diet's Lower House. This marked the first meaningful political realignment since the end of the Second World War and introduced an element of political uncertainty which financial markets rarely welcome. The year was also characterised by a stronger yen which, against the backdrop of a moribund domestic economy, hampered the ability of the export sector to compete. Although the stockmarket failed to make significant headway over the review period, sector rotation in the equity market was quite dramatic and a mirror image of 2008. Thus domestic and defensives sectors, such as utilities and information and communication underperformed the market, whereas economically sensitive sectors such as automobiles and technology performed very well. PORTFOLIO REVIEW Your Company significantly outperformed the Russell Nomura Mid/Small Cap Index (in sterling terms). A portfolio strategy with significant exposure to undervalued cyclical manufacturers and to fast-growing internet related services proved rewarding. Among cyclical stocks, the Company's emphasis on niche automotive parts manufacturers was well rewarded. A cyclical upswing in the automobile value chain, driven by inventory restocking, strong end demand in emerging markets and signs of progress in cost cutting created an ideal environment for auto parts manufacturers. Moreover, a reversal in yen appreciation towards the end of the year fuelled gains in their share prices. The Company's holdings in the TFT-LCD value chain - major detractors from relative returns in 2008 - also enjoyed a strong return reversal and added significant value. Furthermore, holdings in the internet based consumer service providers appreciated on expectations of strong secular top line growth despite weak consumer spending. At the individual stock level, an online advertising company, Cyber Agent, was the single largest contributor to the Company's relative returns over the year under review. Although online advertising growth remained sluggish, Cyber Agent's e-commerce and fee based services, such as its blog and SNS (social networking services), continued to expand and impressive second quarter results reflected the strength of these operations. Automotive parts makers including Takata (seat belts), TS Tech (seats), Toyota Boshoku (interior fabric and components) also ranked among the leading contributors to performance. These niche manufacturers appreciated as the yen weakened towards the end of the year and as expectations grew for a recovery in global demand. Other major contributors included producers of LCD parts and materials. A cyclical upturn in demand for flat panel displays and signs of progress in cutting costs accelerated gains in their share prices. A glass maker, Nippon Electric Glass, benefited from a recovery in sales of LCD glass substrates, and Daicel Chemical from a pickup in shipments of triacetyl cellulose films. Conversely, a holding in consumer finance company Promise detracted from relative returns due to concerns about additional claims for reimbursements of excessive interest charges. The share price performance of Zappallas was also disappointing, but the overweight position was maintained, as new sales opportunities through NTT Docomo (Japan's largest mobile communication provider) were expected to help sustain its mid-term growth. Generic drug producer Nichi-iko Pharmaceutical's share price suffered a setback following the disclosure of talks of a potential cutback in the government's subsidies for the promotion of generic drug usage. However, an overweight position was maintained, as it should benefit from the long term expansion of the generic drug market in Japan as the population ages and costs become a key focal point. The portfolio strategy remains focussed on highly competitive mid/small caps stocks in the fast growing internet based services area. The largest single stock position was held in M3, a provider of a medical portal site. An expansion of the membership base continues to drive the firm's strong sales growth. Exposure was increased to the fast growing SNS providers and leading developers of online games and content for mobile phones which are seeing strong gains in membership numbers and page views. Prime examples are DeNA and Gree. Holdings were also increased in Cyber Agent as there is clear evidence that it has started to successfully monetise its blog service. At the same time, a relatively large exposure was maintained to cyclical stocks in the automobile and technology sectors, which should benefit from a recovery in global demand. Within the technology sector, overweight positions were maintained in electronic components and equipment for hard disk drives and semiconductors such as Tokyo Electron, Horiba and Nichicon. A rapid recovery in final demand for PCs and handsets is expected to drive their earnings recovery. Exposure was reduced in pharmaceutical and food producers including Tsumura and Toyo Suisan Kaisha, which are of a defensive nature, while the portfolio remains geared towards a recovery in global economic activity. The number of holdings in the fund increased from 100 a year ago to 114. This mirrors the availability of attractive investment opportunities in the market. However, the portfolio remained fairly concentrated. OUTLOOK Since the onset of the global financial crisis, a stabilisation in economic activity has been occasioned by an unprecedented and globally co-ordinated fiscal and monetary policy response. This has led to a sharp recovery in some jurisdictions, with the emerging market economies proving to be a particularly important component of global growth. This has undoubtedly put pressure on sovereign debt levels in many western countries and it has yet to be seen whether this will be sufficient to stimulate sustained credit growth. Whilst Japan's geographical position has allowed it to benefit from Asia's economic rebound, the domestic economy currently remains unable to shake off what has been a deflationary environment for over a decade. Moreover, the extent of Japan's negative output gap indicates that price declines will continue well into 2011 and private domestic demand is unlikely to embark on a self sustaining recovery in the near future. However, there are some substantial positives from the corporate sector in Japan and these are likely to be best captured amongst mid and small sized companies. First, the inventory rebuild following the global financial crisis is likely to drive the potential for positive earnings revisions ahead of the full year results season in the spring. In the 2010 Japanese fiscal year, assuming an uptrend in global economic activity and a more stable exchange rate, a sharp rebound in corporate profits should emerge. Second, in certain cases aggressive cost cutting has left companies operationally geared into improving top line growth. Where this powerful combination exists there could emerge some large earnings surprises in 2010. We believe that divergence in earnings growth, which is often ignored during the early stages of recovery, will become increasingly important as the early stage of recovery ends. This is where many future opportunities should emerge and where stock picking will be particularly important. It is also the case that many smaller companies, which due to their limited liquidity were particularly badly affected during the recent fall in the Japanese market, offer good upside potential as earnings recover. Currently, the proportion of mid and small cap stocks which trade below book value remains high and they also compare favourably with large cap stocks. We remain focussed on mid and small cap stocks geared into an improving top line growth, which bodes well for both margins and earnings growth. FIL Investments International 15 March 2010 Principal risks, uncertainties and risk management The Board confirms that there is an ongoing process for identifying, evaluating and managing the principal risks faced by the Company. The Board, with the assistance of the Manager, has developed a risk matrix which, as part of the internal controls process, identifies the key risks that the Company faces. The matrix has identified strategic, marketing, investment management, statutory and administrative and operational and support function risks. The Board reviews and agrees policies for managing these risks. The process is regularly reviewed by the Board in accordance with the FRC's "Internal Control: Revised Guidance for Directors on the Combined Code". Risks are identified, introduced and graded. This process, together with the policies and procedures for the mitigation of risks, is updated and reviewed regularly in the form of comprehensive internal controls reports considered by the Audit Committee. The key risks identified within this matrix are: Market The Company's assets consist mainly of listed securities and the principal risks are therefore market related such as market recessions, interest rate movements, deflation/inflation, terrorism and protectionism. Risks to which the Company is exposed and which form part of the market risks category are included in Note 17 to the financial statements in the annual report together with summaries of the policies for managing these risks. These comprise: market price risk; foreign currency risk; interest rate risk, liquidity risk; counterparty risk and credit risk. The Company had fixed term, fixed rate loan facilities in place which were repaid during 2009. The extent to which any loan facilities will be renewed will be kept under the most careful scrutiny. In November 2009 shareholder authority was obtained to amend the Company's investment policy to permit gearing by way of CFDs. In addition a day to day overdraft facility can be used if required. The impact of limited finance from counterparties including suppliers has not affected the Company to date, however there are alternative suppliers available in the market place should the need arise. The Company relies on a number of main counterparties, namely the Manager, Registrar, Custodian and Auditor. The Manager is the member of a privately owned group of companies on which a regular report is provided to the Board. The Manager, Registrar and Custodian are subject to regular audits by Fidelity's internal controls team and the counterparties' own internal controls reports are received by the Board and any concerns investigated. Investment management The Board relies on the Manager's skills and judgement to make investment decisions based on research and analysis of individual stocks and sectors. The Board reviews the performance of the asset value of the portfolio against the Company's benchmark and competitors and the outlook for the market with the Manager at each Board meeting. The emphasis is on long term investment performance and the Board accepts that by targeting long term results the Company risks volatility in the shorter term. Share price The Board is not able to control the price at which the Company's ordinary and subscription shares trade; it may not reflect the value of the underlying investments. However, it can have a modest influence in the market by maintaining the profile of the Company through an active marketing campaign and, under certain circumstances, through repurchasing shares. Currency The Company's total return and balance sheet are affected by foreign exchange movements because the Company has assets and income which are denominated in yen whilst the Company's base currency is sterling. While it is the Company's policy not to hedge currency, the fact that borrowings by way of CFDs are in yen means that part of the investment portfolio funded by borrowing is naturally hedged against changes in the yen:sterling exchange rate. Further detail can be found in Note 17 to the financial statements in the annual report. Governance/regulatory, financial, operational administration While it is believed that the likelihood of poor governance, compliance and operational administration by other third party service providers is low, the financial consequences could be serious, including the associated reputational damage to the Company. Your Board is responsible for the Company's system of internal controls and for reviewing its effectiveness. Details of this process are provided in the Corporate Governance Statement within this annual report. Financial instrument risks The financial instrument risks faced by the Company are shown in Note 17 to the financial statements in the annual report. The additional risk to the Company of using CFDs rather than traditional forms of borrowing is that the Company does not own the Japanese equities to which the CFDs give exposure and is at risk if the counterparty defaults, for example for insolvency reasons. The balance on all outstanding CFDs is calculated on a daily basis with collateral then adjusted so that collateral equal to the outstanding balance has been recognised, although no collateral adjustment is made where the balance is less than US$1 million. This results in a potential exposure which could be increased due to settlement practices and timing differences, to a maximum of US$1 million plus three days' unrealised trading profits. Other risks Other risks monitored on a regular basis include loan covenants in times when the Company takes out loans, which are subject to daily monitoring, together with the Company's cash position, and the continuation vote (at a time of poor performance). Related Parties Simon Fraser was employed by Fidelity International until the end of December 2008. FIL Investments International is a member of the Fidelity International group of companies. As at the date of this report FIL Limited has an interest in 6,854,100 ordinary shares in the Company (7.17%) and 1,370,820 subscription shares (7.17%) No Director is under a contract of service with the Company and no contracts existed during or at the end of the financial period in which any Director was materially interested and which was significant in relation to the Company's business, except as disclosed in relation to Simon Fraser's interest in the Management Agreement. There have been no other related party transactions requiring disclosure under Financial Reporting Standard ("FRS") 8. Statement of Directors' Responsibilities The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial period. Under the law they have elected to prepare the financial statements in accordance with UK Generally Accepted Accounting Practice. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss for the period. In preparing these financial statements the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for ensuring that adequate accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, including a Business Review, a Directors' Remuneration Report and a Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's pages of the Manager's website www.fidelity.co.uk/its. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their own jurisdictions. We confirm that to the best of our knowledge the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties it faces. Approved by the Board on 15 March 2010 and signed on its behalf. William Thomson Chairman 15 March 2010 Enquiries: Chris Davies, FIL Investments International - 01737 837 723 Rebecca Burtonwood, FIL Investments International, Company Secretary - 01737 836 869 FIDELITY JAPANESE VALUES PLC Income Statement - for the year ended 31 December 2009 2009 2008 revenue capital total revenue capital total £'000 £'000 £'000 £'000 £'000 £'000 Losses on investments designed - (668) (668) - (5,946) (5,946) at fair value through profit or loss Net gains on derivative - 1,694 1,694 - - - instruments held at fair value through profit or loss Income - Overseas dividends 920 - 920 1,284 - 1,284 - Deposit interest - - - 4 - 4 - Dividends on long Contracts 6 - 6 - - - For Difference Investment management fee (682) - (682) (719) - (719) Other expenses (639) - (639) (338) - (338) Exchange gains/(losses) on 2 (1,419) (1,417) 15 2,871 2,886 other net assets Exchange gains/(losses) on - 2,980 2,980 - (9,612) (9,612) loans Net (loss)/return before (393) 2,587 2,194 246 (12,687) (12,441) finance costs and taxation Interest payable on loans and (239) - (239) (269) - (269) CFDs Net (loss)/return on ordinary (632) 2,587 1,955 (23) (12,687) (12,710) activities before taxation Taxation on loss on ordinary (64) - (64) (89) - (89) activities * Net (loss)/return on ordinary (696) 2,587 1,891 (112) (12,687) (12,799) activities after taxation for the year (Loss)/return per ordinary (0.73p) 2.71p 1.98p (0.12p) (13.23p) (13.35p) share (1) A Statement of Total Recognised Gains and Losses has not been prepared as there are no gains and losses other than those reported in this Income Statement. The total column of the Income Statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. * This relates to overseas taxation only FIDELITY JAPANESE VALUES PLC Reconciliation of Movements in Shareholders' Funds - for the year ended 31 December 2009 called Share capital other capital revenue total up share premium redemption reserve reserve reserve equity capital account reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening 24,256 44 2,075 59,591 (8,933) (12,341) 64,692 shareholders' funds: 1 January 2008 Net recognised - - - - (12,687) - (12,687) capital losses for the year Repurchase of (362) - 362 (680) - - (680) ordinary shares Net revenue loss - - - - - (112) (112) after taxation for the year Closing 23,894 44 2,437 58,911 (21,620) (12,453) 51,213 shareholders' funds: 31 December 2008 Net recognised - - - - 2,587 - 2,587 capital gains for the year Bonus issue of 956 - - (956) - - - subscription shares Net revenue loss - - - - - (696) (696) after taxation for the year Closing 24,850 44 2,437 57,955 (19,033) (13,149) 53,104 shareholders' funds: 31 December 2009 FIDELITY JAPANESE VALUES PLC Balance Sheet - as at 31 December 2009 2009 2008 £'000 £'000 Fixed assets Investments designed at fair value through profit or 49,743 65,324 loss Current assets Derivative assets held at fair value through profit 1,692 - or loss Debtors 926 1,124 Cash at bank 2,403 2,301 Cash collateral with lender - 7,045 5,021 10,470 Creditors - amounts falling due within one year Derivative liabilities held at fair value through (101) - profit or loss Fixed rate unsecured loans - (23,952) Other creditors (1,559) (629) (1,660) (24,581) Net current assets/(liabilities) 3,361 (14,111) Total net assets 53,104 51,213 Capital and reserves Called up share capital 24,850 23,894 Share premium account 44 44 Capital redemption reserve 2,437 2,437 Other reserve 57,955 58,911 Capital reserve (19,033) (21,620) Revenue reserve (13,149) (12,453) Total equity shareholders' funds 53,104 51,213 Net asset value per ordinary share Basic 55.56p 53.58p Diluted 55.47p n/a FIDELITY JAPANESE VALUES PLC Cash Flow Statement - for the year ended 31 December 2009 2009 2008 £ £'000 '000 Operating activities Investment income received 906 1,175 Deposit interest received - 4 Investment management fee paid (696) (690) Directors' fees paid (94) (81) Other cash payments (489) (263) Net cash (outflow)/inflow from operating activities (373) 145 Returns on investments and servicing of finance Interest paid on fixed rate unsecured loans (273) (252) Net cash outflow from returns on investments and (273) (252) servicing of finance Financial investment Purchase of investments (90,680) (97,886) Disposal of investments 106,195 106,226 Net cash inflow from financial investment 15,515 8,340 Derivative activities Proceeds of derivatives instruments 103 - Net cash inflow from derivative activities 103 - Net cash inflow before financing 14,972 8,233 Financing Repurchase of ordinary shares - (680) 1.565% fixed rate unsecured loan repaid (9,475) - 1.34% fixed rate unsecured loan repaid (11,497) - Cash collateral held with lender 7,045 (7,045) Net cash outflow from financing (13,927) (7,725) Increase in cash 1,045 508 1. Basic (losses)/returns per ordinary share are based on the net revenue loss on ordinary activities after taxation in the year of £696,000 (2008: £ 112,000), the capital return in the year of £2,587,000 (2008: capital loss of £ 12,687,000) and the total return in the year of £1,891,000 (2008: total loss of £12,799,000) and on 95,577,453 ordinary shares (2008: 95,878,956) being the weighted average number of ordinary shares in issue during the year. The above statements have been prepared on the basis of the accounting policies as set out in the financial statements in the annual report to 31 December 2009. This preliminary statement, which has been agreed with the Auditor, was approved by the Board on 15 March 2010. It is not the Company's statutory financial statements. The statutory financial statements for the financial year ended 31 December 2008have been delivered to the Registrar of Companies. The statutory financial statements for the financial year ended 31 December 2009have been approved and audited but have not yet been filed. The statutory financial statements for the financial years ended 31 December 2008 and 31 December 2009 received unqualified audit reports, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) and (3) of the Companies Act 2006. The annual report and financial statements will be posted to shareholders as soon as is practicable and in any event no later than 12 April 2010.

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